InterviewEmery predicts overcapacity in Asia basic oleochemicals

LONDON (ICIS)--Capacity additions coming onstream in the next 2–3 years will result in oversupplied markets for commodity oleochemicals, the CEO of Emery Oleochemicals said on Thursday.

Kongkrapan Intarajang said around 2m tonnes/year of new capacity – mainly in Indonesia – will flood the market, causing downward pricing pressure, especially in Asia but also affecting Europe and to a lesser extent, the US.

He said the situation could result in some companies merging or going out of business, adding: "In Asia and Europe there are still a lot more possibilities for consolidation and rationalisation; but less so in the US where there are already only three key players."

This could create opportunities for Malaysia-headquartered Emery: "Since we developed our current strategy in 2009 we have been looking out for selective acquisitions, though probably not in commodities. The Europe situation [overcapacity and macroeconomic problems] might create opportunities for us.”

Emery – 50% owned by Malaysia’s Sime Darby Plantation and 50% by Thailand’s PTT Chemical International – is pursuing an aggressive organic growth strategy focused mainly on specialty grades of home and personal care surfactants and plastic additives based on renewable feedstocks.

It aims to switch from a 70/30 split commodity/specialty portfolio to reach 50/50 by 2015–2016. Several plants are planned or under construction, which will boost production of specialties and increase sales from around $1.2bn (€933m) in 2011 to $1.5bn in 2015.

Intarajang added that capital spending of $200m–300m has been set aside for investment in semi-specialty and specialty production projects over the next 2–3 years. This includes the existing announced investments.

Earlier in August Emery broke ground on a €20m ($25m) polymer additives project and technical development centre at Loxstedt in Germany. This is scheduled for completion by the end of 2013.

Asked why the company is willing to invest in Europe when the region is experiencing such tough economic conditions, Intarajang said: “We will invest in Europe where it makes sense. Europe growth will be relatively slow and the mood is not great, but we are looking long-term.

“Maybe this year and next there will be a lot of competition and price pressure on commodities, but for products like these specialty additives there will be a good future in Europe in the long term.”